The era of cryptocurrency's "DeFi Mullet" is coming

Author: Anthony Pompliano, Founder and CEO of Professional Capital Management; Translated by Shaw Jinse Finance

Yesterday, in a conversation with Max Branzburg, Head of Consumer and Business Products at Coinbase, he mentioned a DeFi Mullet model, describing it as "a convenient Coinbase experience on the front end, and DeFi on the back end."

This comment got me thinking about what's happening at the intersection of cryptocurrency and traditional finance. First, it's clear that in ten years, "cryptocurrency" will no longer be a separate entity. Everything will be "finance," and you won't be able to distinguish between centralized and decentralized infrastructure.

This is similar to the evolution of the internet. In the past, there was a distinction between internet companies and non-internet companies.

If you used the internet, people used to think you were cutting-edge, but now if you don't, you're considered a fool. The same thing is happening in the cryptocurrency space. Both emerging fintech companies like Robinhood and traditional companies like BlackRock realize the need to embrace this new technology in various ways. No one would call BlackRock a Bitcoin company, and I doubt many investors would consider Robinhood a cryptocurrency company. But these details don't change the fact that every company is leveraging this new technology to gain an advantage in the market and better serve their customers. The declining importance of the "cryptocurrency" industry is a good sign. It means the technology is becoming standard and expected. This convergence is perfectly demonstrated in the development of exchanges. Coinbase, Kraken, and many other crypto-native exchanges are competing to list public stocks through tokenized securities. Fintech companies like Robinhood, Public.com, eToro, and WeBull are rapidly adding a variety of crypto assets to their platforms. Even the Intercontinental Exchange (ICE), the Chicago Board Options Exchange (CBOE), and Nasdaq are seeking various crypto products or companies to list on their exchanges. There will be no separate cryptocurrency and non-cryptocurrency exchanges in the future. Eventually, exchanges will combine listed stocks, crypto assets, and prediction markets onto a single platform. This is why Coinbase has publicly stated its desire to become a "full-service exchange," and why ICE has invested billions in prediction markets and crypto products. These companies are in a fierce competition to become the primary venue for investors to buy and sell assets in all forms in the future. The winner stands to reap tens of billions of dollars in profits. It's no wonder that these exchanges act as if they're engaged in an all-out war for market share. But this isn't just happening among exchanges. It seems like every day brings a new headline about traditional financial players adopting stablecoins. Yesterday, we saw Coinbase announce a new partnership with Citibank, aimed at "making it easier for Citi's institutional clients to enter and exit the cryptocurrency market." As part of the announcement, Coinbase CEO Brian Armstrong stated, "This is no longer a debate—cryptocurrencies and stablecoins are the tools that will renew the global financial system." I find his logic difficult to argue with at this point. Large financial institutions like Citi are not the only ones seeking to create shareholder value by adopting stablecoins within the traditional system. Western Union says it is piloting a stablecoin settlement system to speed up cross-border payments and reduce its reliance on SWIFT. Its CEO, Devin McGranahan, stated that the company "views stablecoins as an opportunity, not a threat." While this seems reasonable, the real question is whether these traditional companies can act quickly enough to avoid being disrupted. Given that Western Union's stock price has fallen by over 50% over the past five years, the market is more likely to believe that Western Union will be one of the casualties left in the competition between stablecoins and native cryptocurrency payment rails. But here's the thing to note about stablecoins: right now, you have to be a native crypto user to use these assets. You need to know what a wallet is. You need to know the difference between USDT, USDC, USDE, and the many other stablecoins. You have to understand how wallet addresses work and make technical decisions like which blockchain to use to process transactions. Ordinary people don't do any of this. They just want to send, receive, and hold dollars. This is where the "DeFi Mullet" comes in. The user interface must be familiar and trustworthy, while the infrastructure and underlying architecture can be completely upgraded. Victor Yaw has a great description of what might happen in the future. He writes: "Stablecoins will disappear into the channels of the financial system. Money will flow across borders like data flows through the internet: instantly, programmably, and without the intermediaries." This sounds amazing. Users get a much better experience without having to learn any new technology. Add to that the fact that major institutions like BlackRock, JPMorgan Chase, Citigroup, Venmo, and PayPal are all offering these services, and adoption will only grow over time. We've already seen Bitcoin succeed within traditional systems, with some companies packaging the digital currency in traditional formats like exchange-traded funds (ETFs) or publicly traded companies. Now, we’re going to see a similar thing happen with stablecoins, but instead of ETFs and publicly traded companies, it’s payment services and trading platforms that will bring this technology to users. The “DeFi Mullet” era is coming, and who will be the biggest winner? Those who seize this opportunity will reap trillions of dollars in rewards.